Global wheat supplies set to tighten

Forecasts of tightening world wheat supplies is welcome news for farmers but it will mean little for Queensland farmers without widespread soaking rain in the coming weeks.

Global wheat stocks are set to decline for the first time in six years according to the USDA’s first detailed forecasts for the 2018/19 season released late last week. The USDA said 2018/19 world wheat ending stocks by a modest 6 million tonnes from the record large 270mt in 2017/18.

The forecast looked even more encouraging when China’s burgeoning grain stocks are stripped out of the forecasts. World wheat stocks less Chinese stocks are set to tumble by 18mt to 126mt, which would be the smallest since 2012/13. The same applies to corn, where world stocks less Chinese for the 2018/19 season are expected to decline by close to 20mt to the smallest level in five years.

The overriding message from the USDA’s forecasts was that world grain supplies are set to tighten after several years as robust demand for wheat and feed grains cuts available grain stocks by around 12 to 14 per cent.

But ongoing dry weather is now jeopardising the 2018 grain crop. Without rain in the next six weeks, many farmers may not be able to plant winter crops this year. Some farmers in parts of south western Queensland and north-western NSW are already saying they will not plant all their intended area this year because of the dry weather.

It’s a heartbreaking situation for many northern farmers where dry weather has already deprived them of wheat and sorghum crops in the past 12 months. Prospects for rain in the short term remain pessimistic with the latest models showing no meaningful rain in the coming weeks.

Domestic demand has stepped up in recent weeks as buyers move to secure old crop supplies considering the deteriorating prospects to the 2018 season. Grain brokers are reporting heightened interest from buyers who just want to secure grain, despite the rapidly rising prices.

Stockfeed wheat and barley prices climbed by around $10 a tonne last week delivered into Darling Downs markets, with both around $385. New crop prices continued to strengthen in the past week with traders bidding upwards of $360 delivered into the Darling Downs for next season’s wheat and barley.

Many farmers are not able to take advantage of the surging grain prices. A lot of farmers have already sold all last year’s crop while others are holding onto any remaining grain as a fodder reserve for livestock.

Benchmark Chicago wheat futures tumbled by around 5pc last week after the USDA forecast a larger than expected US wheat crop, despite the tighter outlook for the broader global supplies.

Australian weather has moved to the centre stage of world wheat markets in the past weeks. Global wheat buyers are stepping up efforts to build coverage, knowing that prices will continue to strengthen if Australia’s weather remains dry.